*1 rehearing, majority of the However, ultimately join opin- and a do asked I regular judges of the circuit in active question government’s circuit I ion for do rehearing by instituting the criminal case having voted for service not good faith in banc, petition rehearing is surprised by the court in that it was I have no doubt by the district reached denied. legal conclusions us,

court, and, I limited record before circumstances which led not know all the

do indictment. government to seek Wexler’s

Furthermore, gov- possibly I cannot fault the seeking mandamus a writ of

ernment accept representation this court as I its

from corrected,

that, the district court’s unless opinion will be circulated and will

unreported impediment to the enforcement stand as an STATES of America UNITED course, tax laws. Of now goal government of overcom- has obtained

ing opinion, the determi- the district court’s CARRIGAN, P. David L. Fendrick Robert this criminal case should be nation whether and Edward M. Sullivan continued must be made prosecuting and not this court. authorities Sullivan, Appellant. M. Edward close, however, by pointing out that our I No. 93-5687. only give directions opinion is narrow. We jury. respect charge to the to the Ac- Appeals, United States Court of cordingly, possibility do not address the Third Circuit. may way some be able to Wexler Argued May 1994. jury’s bring to the attention the district opinion support a contention that court’s Decided respect good faith with to the he acted Rehearing Aug. Sur Petition for transactions and the deductions involved. issue, however, is not before us and That

consequently express opinion I no with re-

spect to it. PETITION FOR REHEARING

SUR

Aug. Judge, and

Before:

BECKER, STAPLETON, MANSMANN,

GREENBERG, HUTCHINSON, SCIRICA,

COWEN, NYGAARD, ALITO, ROTH, McKEE,

LEWIS, Judges,

POLLAK, Judge Senior District *. rehearing by respon- filed captioned

dent Victor Wexler the above having judges

matter been submitted to the participated in the decision of this court judges all circuit the other available service, regular

the court active and no

judge who concurred the decision Poliak, vania, sitting by designation. H. Honorable Louis Senior Pennsyl- for the Eastern District of *2 Allen, Cohen,

Gary R. Jonathan S. Marion (argued), Dept, E.M. Erickson U.S. of Jus- Div., DC, Washington, Tax appellee. tice (ar- Louis, Robert H. Howard M. Soloman Abrahams, Loewenstein, gued), Bushman & Kauffman, Philadelphia, appellant. PA Judge, Before: HUTCHINSON, Judge, DIAMOND, Judge.* District THE OPINION OF COURT DIAMOND, Judge. (“Sullivan”) appeals an Edward M. Sullivan order the United States District Court Jersey granting sum- the District New mary judgment in favor of the United States summary judg- denying his motion for Specifically, upheld ment. the district court (“IRS”) as- the Internal Revenue Service’s against penalty sessment of a 100% Internal Revenue 6672 of the grounds that he Code pay over feder- Diamond, sitting by designation. Hon. Gustave United States District Pennsylvania, for the Western District of being paid ahead of the United States. were believe taxes. Because we al president of Pat’s was removed as not establish us does before that the record company the fol- and left the August law, will matter of liability as a lowing month. merits. a trial on the reverse remand *3 1989, made an assess- April In the IRS $83,- Background Facts1 of against I. in amount Sullivan the § 6672.3 The to 26 U.S.C.A. pursuant 060.78 1984, began work- Sullivan September In willfully to charged failed that Sullivan IRS International, Pat’s Ltd. president of ing as to the United pay for and over account (“Pat’s”), operated fast food company which a employment taxes withheld federal States Philadelphia-style in specializing restaurants during wages employees Pat’s of from the by hired Robert was Sullivan cheesesteaks. 31, 1985, ending March quarters three of the (“Carrigan”), chairman Carrigan P. 30, 30, 1985, September 1985.4 and June officer and chief executive of directors board 1992, a States filed In United October designation his to of Pat’s. Pursuant seeking to complaint in the district court (1) responsible for president, Sullivan was judgment that had to the assessments reduce raising capital Carrigan in for assisting Sullivan, Carrigan, against and been made (2) investors; man- potential by meeting with Thereafter, § to 6672.5 Fendrick (3) locating and operations; aging restaurant of seeking dismissal filed an answer Sullivan was au- sites. Sullivan also new restaurant him to complaint against failure state for from the com- to checks drawn thorized granted, could be upon a which relief claim operating ac- general and pany’s payroll seeking re- a and also filed a counterclaim counts. penal- paid of on account of the fund $100.00 1985, first In or March Sullivan February against Upon him.6 consider- ty assessed not current in that Pat’s was became aware summary judg- for ation of cross-motions quarterly employment taxes payment its of ment, that “[a]l- the district court found During this same States.2 to the United may always had the though not have Sullivan $20,000.00, period, creditors, loaned Pat’s apoc- time Sullivan say paying in the ‘final’ about Carrigan, word,” so it could request responsi- at the of that alyptic of the he was a sense (1) creditors, including pay § the IRS. Sullivan he had ble 6672 because however, gener- steps, signature authority payroll to that the and took no ensure accounts, liability, at $20,000.00 operating which he exercised applied to the tax al was payment making to other creditors least once tax though even he knew that thereof, shall, to other exclusively payment addition are drawn from the 1. These facts law, provided by penal- stipulations penalties liable to a parties’ joint and be pretrial admissions evaded, ty equal of the tax to the district court. to total amount submitted collected, paid and or or not not accounted during over. demonstrates his 2. The record also that § Pat's, 6672. 26 U.S.C.A. president was aware tenure as of Sullivan pay employer duty and that an has a to withhold time, the IRS assessments 4. At the same made employment the federal over to the States $204,820.33 Carrigan and against the amount employees. was aware taxes of its Sullivan also ("Fen- against David Fendrick those the collec- individuals drick”), taxes, for the payment employment chief financial officer tion and 30, 1985, so, through ending personally quarters March liable for four failed to do could be held 31, paid 1985. taxes not December the amount of the United States. Carrigan plead failed to or other- 5. and Fendrick part: provides pertinent defend, 3. This section against wise and defaults were entered 14, May They are them this action 1993. on Tax, Pay and Over 6672. to Collect Failure parties appeal. not to this Attempt to Evade or Defeat Tax. (a) Any person required to Rule. General for, collect, February $100.00 of the truthfully pay paid account over him, against and simultaneous- any imposed fails made tax this title who assessment tax, request ly truthfully filed a claim for refund and or to collect such account tax, The refund willfully attempts of the entire pay assessment. over such abatement 8,May any any such tax or claim was denied IRS to evade or defeat manner (3) Pat’s; IRS; pay any he account for or over he tax due to the States, significant raising capital for United time to States. Brounstein v. United devoted (3d Cir.1992). company 979 F.2d company; “Responsi- loaned the he Further, status, bility duty, is a matter of authority, creditors. Quattrone Accountants, knowledge.” district court found IRS, (3d Cir.1990). Inc. v. 895 F.2d taxes be- responsible person A unpaid need not cause he was aware of the tax have exclusive finances, being paid control over the and that other creditors he need were IRS, only have yet failed to exercise his control. United ahead (3d Cir.1989). Vespe, 868 F.2d authority paid, to ensure that the taxes were *4 significant “A personally the that he has control if either with he has significant the final or existing the word over which bills loaned to Pat’s from balances get paid.” Quattrone, on he had creditors 895 in the accounts which F.2d authority.7 determining at 927. In signature whether an individu- responsible person, al is a courts also consid- jurisdiction The district court had (1) er other factors. These include: the by parties’ claims virtue of 28 U.S.C.A. corpo- duties of the officer as outlined the 1340, 1345, §§ and 1355 and 26 U.S.C.A. (2) by-laws; ability rate the of the individual jurisdiction §§ 7401 and 7402. We have over (3) corporation; to checks of the the § appeal the to 28 U.S.C.A. taxpayer’s signature employer’s feder- grant reviewing the district court’s (4) returns; al employment or other tax the summary judgment plenary of we exercise officers, identity of the directors and share- employ appli review and the same standard corporation; of identity holders the cable in the district court. Davis v. Portline employ- the individuals who hired and fired (3d Maritime, Transportes 16 F.3d 536 individual(s) ees; identity Cir.1994). We must consider all of the facts charge who were of the financial affairs light and inferences in the most favorable to Brounstein, corporation. 979 at F.2d nonmoving party. moving party The can 954-55. summary judgment prevail in its motion for Applying foregoing principles to only genuine if there is no issue of material case, present we find that there is a moving party judg to fact and the is entitled concerning issue of material fact ment as a matter of law. Peters v. Delaware “significant whether Sullivan had control” (3d Authority, River Port 16 F.3d Although over financial Pat’s affairs. Cir.1994). undisputed evidence this record establish president es that Sullivan functioned as the II. Discussion Pat’s, signature authority exercised his question of Sullivan’s under sign corporate one occasion to check which presents § 6672 two issues: whether Sullivan liabilities, applied to Pat’s tax and devot responsible person is a and whether he will- raising ed a amount of his time to collect, fully truthfully failed to account for or capital company, undisputed for the evi employment over federal taxes. As we dence also indicates that control extensively have discussed the standards for significantly over Pat’s financial affairs was before, addressing these two issues we will by Carrigan circumscribed and Fendrick. only points. summarize their salient willWe opinion: As the district court stated responsible person issue. first address the undisputed It is that Sullivan did not manage- control over the have exclusive A. parties agree ment of Pat’s. Both person responsible Carrigan A defendants and Fendrick were collect, truthfully willfully person required responsible persons is a to period During payroll that Sullivan was account of no more than positive general operating and knew that the taxes were not balance in the account $132,770.43. being paid, positive in the more than there was a balance of no B. taxes. collect and responsible for Carrigan was Defendant whether We next consider Defendant handling financial affairs. truthfully account for and failed Officer, Fendrick, Financial David due. The term willfulness pay over the taxes books, records, and all of Pat’s maintained broadly encompass a interpreted has been Carrigan and Defendants bank accounts. persons. range actions inquiries handled all creditors’ Fendrick Generally, “voluntary, con willfulness is a prepared Fendrick and bills. Defendant prefer oth and intentional decision to scious employ- income and all federal and filed Quat er creditors the Government.” over Fendrick Defendant trone, tax returns. regard, F.2d at 928. In this “a negotiations the IRS all pays also directed responsible person acts if he tax liabilities. Sulli- regarding unpaid preference to the IRS other creditors any meetings participate respon Id. A knowing van did that taxes are due.” willfully if person also acts he demon with the IRS. sible disregard for tax strates a reckless whether Additionally, not own stock Sullivan did paid. Vespe, 868 F.2d at 1335. es have been returns, signed Pat’s tax he never disregard” standard is met if The “reckless *5 creditors on be- negotiated he never with “‘(1) clearly ought taxpayer to have Pat’s, independent no half of and he had grave a risk that known that there was employees without authority to hire or fire being paid and if taxes were not Carrigan. of defendant the consent position he was in a to find out for certain ” sign very Wright authorized to checks easily.’ (quoting was Id. v. United Sullivan (7th Cir.1987)). States, 425, respect pay- with to the F.2d 427 on behalf of Pat’s 809 general operating ac- roll account and the in Applying principles these to the books, However, corporate rec- count. case, that there is a stant we find were locked in an ords and checkbooks concerning issue of material fact whether office, not have his own and Sullivan did pay over the taxes Sullivan signed only key. He one check on behalf Although that due. the record establishes company. In Sullivan of the $20,000.00 company Sullivan lent the signed corporate cheek in the amount of creditors, IRS, including but took no $9,451.61 applied to Pat’s out- which was the tax be steps other to direct that quarter standing tax liabilities for the third that one paid, the record also establishes of 1985. sign check that Sullivan did Pat’s, $9,451.61, paid to a check for foregoing light In of the facts that Sullivan IRS. handling financial was not Additionally, company, prepare, did not the record before us is not affairs of the maintain, any corpo concerning whether the check to the or have access to clear checkbooks, books, did not IRS came from the funds lent Sullivan or rate records or returns, any is prepare corporate tax from some other source. The record any equally unclear about how much tax was due and did not handle creditors’ bills any signed inquiries negotiate nor creditor on when Sullivan the check the IRS. Likewise, the record not indicate what it cannot be said as matter does behalf knowledge concerning tax had control of the Sullivan had of law he company’s liability when he made the loan. financial affairs. Based on all the record, admittedly we hold that a reasonable Given his limited access to the evidence records, jury could find that was not a re tax and other financial Liberty may not have with reckless sponsible person. Anderson v. Lob Sullivan acted Inc., being by, disregard of whether the taxes were 477 U.S. S.Ct. (1986). conclude, therefore, paid steps when he took no to direct L.Ed.2d 202 We applied exclusively tax granting court erred in sum be to Pat’s that the district evidence, liability. light of all the mary judgment in favor of the United States jury that a reasonable could find that on this issue. believe fail to did not conclude, therefore, that due. taxes We granting summary court erred

district

judgment in favor of the United States issue.

this

III. Conclusion reasons, foregoing judgment

For the granting summary judg- district court for the United will be reversed

and the case will be remanded for further

proceedings opinion.8 consistent with this

SUR PETITION FOR REHEARING

Aug. Judge,

Present:

HUTCHINSON, Judge,

DIAMOND,* Judge. rehearing Appel- filed

lant Edward M. Sullivan the above-entitled judges to the

case been submitted court, participated in the decision of this judge

and no who concurred the decision *6 rehearing, asked for

rehearing is denied. America,

UNITED STATES of

Appellant 94-7000, at No. SCHEIN, Appellant M.

Michael

at No. 93-7809.

Nos. 94-7000. 93-7809 & Appeals,

United States Court of

Third Circuit. 34.1(a)

Submitted Under Third Circuit LAR

June

Decided Diamond, appealed 8. Sullivan also has the denial of his Hon. Gustave summary judgment. motion for Because we Pennsylvania, for the Western District of have determined that there is a issue of sitting by designation. regarding material fact we hold that court the district did not err denying summary judgment. his motion for